Some 'Experts' Are Selling Foolish Advice About Selling Stockshttp://www.businessinsider.com/foolish-advice-about-selling-stocks-2013-1/comments
en-usWed, 31 Dec 1969 19:00:00 -0500Fri, 09 Dec 2016 22:08:32 -0500Daniel Solinhttp://www.businessinsider.com/c/511282816bb3f70566000003hempshawWed, 06 Feb 2013 11:19:13 -0500http://www.businessinsider.com/c/511282816bb3f70566000003
Portions of Solin's critique of Hudspeth's article are fair (i.e. that warning signs may be a day late and a dollar short). However, Solin's attempt to discredit the purchase of individual securities is, itself, "fundamentally flawed".
Solin states that: "stocks have 'idiosyncratic' risk" This is true, each stock is unique in its risk characteristics. It is the back-half of this claim where he deviates from reality, that the expected return of a stock is the same of it's index. Hogwash!
It is fundamental logic that if one presupposes that a stock has idiosyncratic risk, then one must assume that a stock also has idiosyncratic returns.
Solin denies this basic law by asking "Why would you adopt an investing strategy where you have the same expected return as an index of similar stocks, but significantly more risk?"
I agree with Solin that beating the market, or your index of choice is indeed something that most investors should not expect. However, his use of basic logic, and understanding of investing in individual stocks is trumped by his biased view on index investing.http://www.businessinsider.com/c/51127a1b69bedd102f000012GregWed, 06 Feb 2013 10:43:23 -0500http://www.businessinsider.com/c/51127a1b69bedd102f000012
A portfolio of even 5-10 stocks and certainly 20 or so starts to act a lot like an index risk wise, but with even lower associated expenses. You can also create an "index" specific to your personal goals like "High Dividend Yield". That's why individuals should buy specific stocks. It's not always speculation and flipping on a hot stock.